The Next Steps for St. Louis’ Startup Scene

As 2014 collects growing national attention for the St. Louis startup scene, we are faced with the challenge of continuing the buzz. And even more so, grabbing hold of what it will take St. Louis to reach the “next level” of the larger startup community alongside talked about cities such as Austin, Denver and Washington, D.C.

The recurring topic of almost every startup conversation, funding, carries a great deal of weight. “Absolutely need more money at the table!” says Rick Holton of Holton Capital Group. Many people express interest in investing but don’t follow through with a check. This leaves companies to rely on too few sources for funding. “That being said, we have funded more early stage ventures than ever before and we are seeing serious traction from those funded,” says Holton. Programs like Arch Grants and Capital Innovators have aided a number of the startups that have gained such traction through funding programs. These programs not only establish a reputation for themselves and the companies they fund with success stories, but for St. Louis as a hot spot for investment. “Attracting venture capital investment to the region is critical, and such investors will materialize as fund mangers identify opportunity here,” says Scott Bernstein of Capital Innovators.

Tyler Sondag of St. Louis University’s Center for Entrepreneurship believes the next big thing St. Louis needs is actually a small thing (or several small things): a small-money investment fund. “We have Arch Grants, and that’s great. All of the other organizations and programs we have are fantastic, too, really. Think about the people and companies that are winning these awards and spots in programs, though, and the positions most of them have been in when they were given these awards or spots. Now think of how many of them could have used $5,000 or $10,000 a year before they won those awards and spots, and think of what they could have done with that,” says Sondag. Every fledgling entrepreneur does not need $50,000, though they could probably use it. This factor combined with a limited number of opportunities to win the larger prizes makes funding an even harder bridge to cross.

In the last year, numbers at group meet-ups like StartLouis, for example, skyrocketed. “Do the people coming to events like these and others around town have the next Arch Grants-winning idea? Realistically, possibly, but probably not. But could a small investment, some mentorship, future planning and elbow grease make a difference in a city like this at a time like now? You bet,” says Sondag.

What the aforementioned hot startup cities blatantly have over us is more exits, big and small. Many potential investors are waiting to see a stronger pattern of exits from St. Louis before they will invest. “We have some quick successes to point to and it frees up investors to put money back into the ecosystem. Big names arguably help with the reputation issues. Chicago has Groupon, Indianapolis has Angie’s List, and St. Louis has, well, who? We have a lot of potential companies vying for that first big success in the tech space and most of them are solving real problems,” says Matt Menietti of SixThirty.

A front-page exit will, no doubt, drive funds from a number of resources towards St. Louis, but a steady pattern of smaller successful exits will continue building a firm foundation for investor interest. All successful exit stories validate the St. Louis model and entice potential venture capitalists to allocate more of their investments here.

Bringing people to St. Louis is also on the docket. “A big step is outside people coming in – talent, money, ideas, organizations,” says Menietti. In the last year, St. Louis has made agreements with programs like Venture for America, Enstitute and The Cambridge Innovation Center that will carry fresh, top talent to our region. Likewise, four new startups came into St. Louis for the first SixThirty class. The St. Louis startup community is steadily increasing in substance and image, and thus sparking interest in what our city might offer. “Outsiders coming into the community is a big sign that we’re doing something right because those individuals aren’t drinking the Kool-Aid like a lot of us who live it and breath it everyday,” says Menietti.

How do we tell the potential transplants about our Kool-Aid? Effective PR is vital. We have groups like Rally St. Louis and Arch Grants to thank for excelling at telling our story on a national level. “Downtown St Louis is ‘fertile ground’ for start-ups, and as such, is attracting more interest from entrepreneurs from around the United States. With access to funding and support, the recent surge in start-ups calling downtown St Louis home is just the beginning,” says Daniel Deville of yurbuds.

Hearing someone you know say “Oh yurbuds is from St. Louis?” That’s significant. We want the world to know our startups. Answering ‘yes’ and that person changing the narrative to “Oh yeah, yurbuds, they’re from St. Louis.” That conversation is where the future of St. Louis’ startup scene lies.